Rent for a one bedroom apartment in San Francisco plunged nearly 12% year-over-year in June, according to apartment rental platform Zumper. That’s a record decline for the city and the largest drop of any market in the country.
Big picture: What’s happening in SF is happening in large cities across the U.S.
Zumper’s calling it the “Brooklyn Effect”—when people move from expensive cities to less expensive cities close by (could probably use a name change at this point).
Prices in two of those cheaper cities, Sacramento, CA, and Providence, RI, rose around 5% last month while the majority of the most expensive markets trended down.
Why is this happening? Cities are for work and play. As more employers embrace remote work and bars prove to be a popular coronavirus hangout, overpriced apartments lose their appeal—even if they were once great pregame spots.
But the effect is most pronounced in the tech hub of San Francisco, where companies are 1) more likely to implement “work from anywhere” policies or 2) have shed jobs as the pandemic crushed their business.
I've heard horror stories about Real Estate Prices in the Bay Area, but do you think this could bleed into the San Antonio market since so many Californian's are "infesting" Texas? Or perhaps, is this migration beginning the cycle?
Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
6y
I think it's definitely a possibility, as like you said so many people from CA & NY have been moving to TX over the past decade. This should just amplify that. If they're a homeowner in the bay or large cities, I'm not sure though since the logistics of selling their current home (possibly taking a hit), and then relocating elsewhere seems to be a very serious move. I think folks who are a bit more flexible (renters) can make that switch easier.
Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
6y
I think it's definitely a possibility, as like you said so many people from CA & NY have been moving to TX over the past decade. This should just amplify that. If they're a homeowner in the bay or large cities, I'm not sure though since the logistics of selling their current home (possibly taking a hit), and then relocating elsewhere seems to be a very serious move. I think folks who are a bit more flexible (renters) can make that switch easier.
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
In the last few months, I've had a ton of inquiries from people with portable jobs that are thinking of moving to San Antonio from higher priced cities. So far only a few have pulled the trigger, but I believe we'll see a lot more of this in the near term. One thing that seems to appeal to people from larger cities is that we have a decent little downtown, but also a ton of nearby parks and other outdoor activities. Some of them seem willing to trade the larger city lifestyle for some additional nearby recreation options. Of course, the biggest reason we should see an influx is our relative pricing to other top 10 cities. Their dollars go much further here than any city that looks like ours.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
6y
I think there is going to be some influx, BUT people here in San Antonio are complaining about the high prices right now in the purchases AND rentals. I have neighbors that are complaining that their values are going over 200k when they have just under 2000sf. The taxes are harsh for the investors as well as the homeowners. There are 2mil locals and several 1000 newcomers. I dont think the newcomers are going to push up prices.
Some renters and homeowners will combine with family or friends when they can not afford it anymore. It is crazy but I hear people moving in with their older parents because they have the over 65 exemption on their house. They sell at the top of the market and take care of or fix up Mom's or Dad's house with the extra cash. Consolidation!!
As far as renters, two individuals spending $800 each can rent a 2 bedroom for $1100 or $1200 or rent a 3 bedroom house for $1500. People can definitely pay less or consolidate with family.
There will be some movement from the coasts, but I have been in LA at many different parts of the year and it is almost always 85 to 90 in the afternoon and 50 to 60 overnight. A beach within an hour, skiing within several, Vegas a short drive away, You can not beat that!!!
Bottom line: I dont see prices going up very much if at all here in San Antonio. Of course there will be niches that will go up, but I see overbuilding and contraction in the market due to being 12 years into the cycle.
Investor · San Antonio, TX · Member since 2012 · 596 posts · 587 votes
6y
There is no mass exodus of Californians moving to Texas. Yes, Californians make up the largest numbers of new arrivals, but there's no "influx." And, as of this year, Californians prefer relocating to Florida over Texas. Sure there are stories about small towns on the West Coast seeing thousands of Californians relocating. That will definitely stress a small town, it's resources, infrastructure, and definitely increase sales and lease rates. But even if "thousands" migrate to Dallas, Houston, or San Antonio, those cities will just absorb it.
In San Antonio we are gaining +/- 20,000 new residents per year, only a small percentage of those are Californians. This isn't enough for that specific demographic to have a profound effect on anything. The more important statistic is the that of the total number of new residents, no matter where they are from. And of those new residents, we need to look at their socioeconomic status as well as their educational attainment level. These two factors will have an effect on real estate prices.
San Antonio has a relatively low educational attainment level (aka small percentage of college graduates, relative to other cities of the same size). Because of this, our large employers have a limited local qualified labor pool. And more often than not, they have to import (from other states & cities in Texas) candidates that have the credentials for those positions.
Generally speaking higher educated people earn more than those without degrees. So what we are seeing out the 20K new residents are higher educated & high income earners. This demographic is making up a significant percentage of these new residents. In turn, we are seeing folks from more expensive cities relocate to San Antonio. They sell their builder grade McMansion in Phoenix for $500K and move hear and get 2x the property for $300K. Since both our average & median home sold prices are well below $300K, these more affluent buyers are having a direct effect on sales prices. Factor in inflation, and the constant trajectory of the SA economy and you're definitely going to see both housing prices and residential lease rates rise.
This doesn't bother me. The bigger concern is the growing spatial mismatch between San Antonians and housing/leasing prices. Our economy still has a very high percentage of service industry workers. These are not high income earners. Housing prices and lease rates our outpacing their wages. The average American spends 30% of their income on housing, for the lower income demographic in San Antonio, that can be up to 50%. In a city with almost half of the population renting, jumps in lease rates could mean big problems for our city and its residents.
So yeah, prices are rising. Will we ever see San Francisco or NYC prices, no. Because the last factor is space, and Texas has a ton of it. Ever heard the term "drive til you qualify?" Cities like San Francisco, Seattle, NYC, etc. are dense & highly populated, with no room for physical growth. This just isn't a problem in Texas. Even our urban cores not very dense; especially in San Antonio. So I don't think there are any worries of our new residents "California-ing our Texas."
